Key Takeaways
- • Franklin Templeton raised possible SEC regulatory relief for blockchain-based trading of tokenized money-market funds and ETFs at an Oct. 9 meeting with the SEC's Crypto Task Force.
- • The agenda examined how Section 22(d) and Rule 22c-1 would apply when tokenized money-market fund shares trade against tokenized NMS stocks, and whether liquidity providers could charge fees in those transactions.
- • A Sept. 17 SEC order created a temporary, conditional framework for certain permissioned venues trading tokenized NMS stocks through automated-market-maker liquidity pools, but it does not exempt participants from the Investment Company Act of 1940 or resolve Section 22(d) and Rule 22c-1 questions.
- • Franklin Templeton's Franklin OnChain U.S. Government Money Fund, whose BENJI token represents fund shares, had $1.98 billion in AUM as of April 29; the firm's companywide AUM was $1.68 trillion as of March 31.
Summary
Franklin Templeton used an Oct. 9 meeting with the SEC's Crypto Task Force to seek regulatory relief for blockchain-based trading of tokenized money-market funds and exchange-traded funds, according to TokenPost. The proposed agenda centered on how Section 22(d) of the Investment Company Act, which generally governs the prices at which redeemable fund shares may be sold, and Rule 22c-1, which generally requires fund transactions to be executed at the next calculated net asset value after an order is received, would apply when tokenized money-market fund shares trade against tokenized National Market System stocks. Applying those requirements to automated liquidity pools could affect how tokenized fund shares are bought and sold. The discussion also covered whether liquidity providers could charge fees in these transactions.
The discussions extended to tokenized NMS ETFs paired with tokenized stocks, and to permitted payment stablecoins or tokenized money-market funds. Franklin Templeton asked whether additional relief would be needed because a tokenized securities venue is not a national securities exchange. The agenda also addressed pools that hold specified tokenized assets and issue interests to liquidity providers, including whether such pools could be treated as investment companies and whether their interests could qualify as securities under the Securities Act of 1933 and the Securities Exchange Act of 1934.
The Sept. 17 SEC order provides the current backdrop. It established a temporary, conditional framework for certain permissioned venues trading tokenized NMS stocks through automated-market-maker liquidity pools and allows tokenized money-market funds to serve as one possible trading pair. The framework does not provide an exemption under the Investment Company Act of 1940 and does not resolve the related Section 22(d) and Rule 22c-1 questions, and it is set to expire five years after publication.
Franklin OnChain U.S. Government Money Fund is an open-end government money-market fund that relies on Rule 2a-7, with BENJI tokens representing its shares. Its AUM totaled $1.98 billion as of April 29. Separately, SEC staff issued a no-action position on Aug. 12 concerning custody arrangements under Section 17(f) and Rule 17f-2 for funds investing in OnChain Fund shares; that position did not address secondary-market trading under Section 22(d) or Rule 22c-1. In June, on June 2, Franklin Templeton connected its Benji Technology Platform with MoonPay Trade, allowing eligible institutions to move through supported stablecoins and tokenized money-market fund exposure using on-chain execution.
The discussions extended to tokenized NMS ETFs paired with tokenized stocks, and to permitted payment stablecoins or tokenized money-market funds. Franklin Templeton asked whether additional relief would be needed because a tokenized securities venue is not a national securities exchange. The agenda also addressed pools that hold specified tokenized assets and issue interests to liquidity providers, including whether such pools could be treated as investment companies and whether their interests could qualify as securities under the Securities Act of 1933 and the Securities Exchange Act of 1934.
The Sept. 17 SEC order provides the current backdrop. It established a temporary, conditional framework for certain permissioned venues trading tokenized NMS stocks through automated-market-maker liquidity pools and allows tokenized money-market funds to serve as one possible trading pair. The framework does not provide an exemption under the Investment Company Act of 1940 and does not resolve the related Section 22(d) and Rule 22c-1 questions, and it is set to expire five years after publication.
Franklin OnChain U.S. Government Money Fund is an open-end government money-market fund that relies on Rule 2a-7, with BENJI tokens representing its shares. Its AUM totaled $1.98 billion as of April 29. Separately, SEC staff issued a no-action position on Aug. 12 concerning custody arrangements under Section 17(f) and Rule 17f-2 for funds investing in OnChain Fund shares; that position did not address secondary-market trading under Section 22(d) or Rule 22c-1. In June, on June 2, Franklin Templeton connected its Benji Technology Platform with MoonPay Trade, allowing eligible institutions to move through supported stablecoins and tokenized money-market fund exposure using on-chain execution.
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